The EDB: Belarus is the most integrated EAEU country in terms of trade

Belarus remains the most integrated country in terms of trade with the EAEU countries, especially Russia. This finding is presented in the report titled Main Trends in Belarus’ Integrated Development in 2018 prepared by the Directorate for Research at the Eurasian Development Bank (EDB).

In 2018, the country’s foreign trade improved significantly: a surge in exports ensured a decrease in the deficit of its overall foreign trade in commodities. The key drivers of exports primarily were: favourable global prices of exported oil products and fertilisers, an improvement in the overall trade environment and stable demand from EU-28 countries. The government and major exporters’ efforts to diversify exports also had a positive effect on export indicators and ensured an increase in supplies to Asia (China, in particular) and Latin America (Brazil).

The Belarusian government continued to pursue its new concept of diversifying exports, which suggests that these should be distributed in a balanced manner according to the “one third” principle among the EAEU, EU and “farther” countries.

Despite the overall improvement in its import and export indicators, Belarus’ trade integration with the EAEU countries weakened in terms of both significance and intensity. Exports to the Union countries were constrained by deteriorated competitiveness, lower demand on commodities exported by Belarus to its partnering countries, as well as Russia’s institutional restrictions on agricultural produce. Price, volumes and the terms of energy commodity import to Belarus were a regular topic of its intense bilateral high-level negotiations with Russia. At the same time, a stronger demand backed by economic recovery in Russia and strengthened cooperation with Armenia and Kazakhstan in the framework of the EAEU still drove the growth of the country’s exports of manufactured goods. Belarus remains the most integrated EAEU country, by a large margin.

With Russia’s active financial support to the Belarusian economy on both governmental and corporate levels, the financial integration channel improved significantly over the period. In particular, Russia ensured its position as Belarus’ leading foreign investment partner over the year, with a share of of 38.3% of FDI. In 2018, the Russian government and banks accounted for 37.3% of all foreign loans extended to Belarus. Remittances are of limited importance to the country’s economy and balance of payments, compared to other EAEU countries.

In 2018, Belarus’s relations with the EDB and EAEU countries were marked with, on the one hand, expanded trade and cooperation and, on the other hand, the ongoing negotiations about Belarusian supplies to the Russian market and in the oil and gas sector. The chemical and fuel sectors, as well as IT, continued to lead the industrial structure of Belarus’s corporate ties with EAEU countries in 2018.

The full version of the report is available on the EDB’s website, in the respective section.